Consumer Confidence Slide Sends Warning to Main Street Small Businesses
BY PYMNTS | MAY 30, 2023
Consumer confidence continues to wane.
And in May, it’s a less-sanguine view of the labor market that has households feeling a bit less cheerful about their prospects, which may signal some trouble ahead for Main Street businesses.
The latest data from The Conference Board shows that the Consumer Confidence Index stood at 102.3, which is the lowest level seen since the end of last year and which was down from the 103.7 seen in April.
The board noted that the Present Situation Index — which takes into account the assessment of business and labor market conditions in the here and now — decreased to 148.6 from 151.8 last month.
The Expectations Index — based on consumers’ short-term outlook for income, business and labor markets — was also down to 71.5 in May versus 71.7 in April. A reading below 80 tends to signal that consumers expect a recession within the next year.
More Pessimism in the Labor Market
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As for the labor market, the group of consumers who said jobs were “plentiful” was at its lowest level in more than two years and declined to 43.5 in May from 47.5 in April. As many as 12.5% of consumers said jobs were “hard to get” versus 10.6% in April. In the meantime, expectations for inflation hover at more than 6%, which is a threshold that has been expected in past readings too.
If consumers are a bit warier about their job prospects near term — where moving to a new job might signal higher income and thus purchasing power — and they still see inflation in the mix, they might temper their household budgets too.
There’s a qualitative line in the data that shows at least some willingness to spend money at present.
“[P]lans to purchase autos and big-ticket appliances ticked up somewhat compared to April,” The Conference Board found.
The mindset might be one where spending plans are informed by uncertainty over what things will look like in a few months. Make hay while the sun shines, goes the old saying. And, indeed, the inventory picture is improving in the U.S. when it comes to vehicles, which may spur some buying.
But the question is: What happens to the Main Street firms that do not traffic in trucks and cars, especially for merchants that sell items such as, say, clothing?
PYMNTS’ Main Street merchant surveys signal that 59% expect the economy to enter a recession in the next 12 months. Inflation has been cited as the top challenge faced by these companies, at nearly 43% of the overall sample. Some 23% said uncertainty about economic conditions remains the top challenge.
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In the meantime, the cash crunch is real. PYMNTS data shows that only 26% of firms have access to cash that is the equivalent of two months’ worth of revenues. The problem is most acute in retail trade and professional services firms, where roughly two-thirds of those firms see a recession on the horizon, and more than 40% of each of those segments have less than 30 days’ worth of cash in the coffers.
A real and sustained pullback in consumer spending would hit those verticals significantly, and the consumer confidence data just released should give those Main Street stalwarts some new reasons to be concerned.
Source: Pymnts
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